Reinventing the Wheels

New ways to design, manufacture, and sell cars can make them ten times
more fuel-efficient, and at the same time safer, sportier, more beautiful and
comfortable, far more durable, and probably cheaper. Here comes the
biggest change in industrial structure since the microchip

On September 29, 1993, the unthinkable happened. After decades of
adversarial posturing, and months of intensive negotiations with Vice
President Al Gore, the heads of the Big Three auto makers accepted
President Bill Clinton's challenge to collaborate. They committed their
best efforts, with the help of government technologies and funding, to
developing a tripled-efficiency "clean car" within a decade, and a year
later they reported encouraging progress. Like President John F. Kennedy's
goal of putting people on the moon, the Partnership for a New Generation
of Vehicles (PNGV) aims to create a leapfrog mentality--this time in
Detroit. However, the PNGV's goal is both easier to attain and more
important than that of the Apollo program. It could even become the core
of a green industrial renaissance--instigating a profound change not only
in what and how much we drive but in how our whole economy works.

The fuel efficiency of cars has been stagnant for the past decade. Yet the
seemingly ambitious goal of tripling it in the next decade can be far
surpassed. Well before 2003 competition, not government mandates, may
bring to market cars efficient enough to carry a family coast to coast on
one tank of fuel, more safely and comfortably than they can travel now,
and more cleanly than they would with a battery-electric car plus the
power plants needed to recharge it.

To understand what a profound shift in thinking this represents, imagine
that one seventh of America's gross national product is derived from the
Big Three typewriter makers (and their suppliers, distributors, dealers,
and other attendant businesses). Over decades they've progressed from
manual to electric to type-ball designs. Now they're developing tiny
refinements for the forthcoming Selectric XVII. They profitably sell
around 10 million excellent typewriters a year. But a problem emerges: the
competition is developing wireless subnotebook computers.

That's the Big Three auto makers today. With more skill than vision,
they've been painstakingly pursuing incremental refinements on the way to
an America where foreign cars fueled with foreign oil cross crumbling
bridges. Modern cars are an extraordinarily sophisticated engineering
achievement--the highest expression of the Iron Age. But they are
obsolete, and the time for incrementalism is over. Striking innovations
have occurred in advanced materials, software, motors, power electronics,
microelectronics, electricity-storage devices, small engines, fuel cells,
and computer-aided design and manufacturing. Artfully integrated, they can
yield safe, affordable, and otherwise superior family cars getting
hundreds of miles per gallon-
roughly ten times the 30 mpg of new cars today and several times the
80-odd mpg sought by the PNGV.

Achieving this will require a completely new car design-- the ultralight
hybrid, or "hypercar" (a term we now prefer to our earlier term
"supercar," because that also refers to ultrapowerful cars that get a
couple of hundred miles per hour rather than per gallon). The hypercar's
key technologies already exist. Many firms around the world are starting
to build prototypes. The United States is best positioned to bring the
concept to market--and had better do so, before others do. Hypercars, not
imported luxury sedans, are the biggest threat to Detroit. But they are
also its hope of salvation.

THE ULTRALIGHT STRATEGY

Decades of dedicated effort to improve engines and power trains have
reduced to only about 80-85 percent the portion of cars' fuel energy that
is lost before it gets to the wheels. (About 95 percent of the resulting
wheelpower hauls the car itself, so that less than two percent of the fuel
energy actually ends up hauling the driver.)

This appalling waste has a simple main cause: cars are made of steel, and
steel is heavy, so powerful engines are required to accelerate them. Only
about one sixth of the average engine's power is typically needed for
highway driving, and only about one twentieth for city driving. Such gross
oversizing halves the engine's average efficiency and complicates efforts
to cut pollution. And the problem is getting worse: half the efficiency
gains since 1985 have been squandered on making engines even more
powerful.

Every year auto makers add more gadgets to compensate a bit more for the
huge driveline losses inherent in propelling steel behemoths. But a really
efficient car can't be made of steel, for the same reason that a
successful airplane can't be made of cast iron. We need to design cars
less like tanks and more like airplanes. When we do, magical things start
to happen, thanks to the basic physics of cars.

Because about five to seven units of fuel are needed to deliver one unit
of energy to the wheels, saving energy at the wheels offers immensely
amplified savings in fuel. Wheelpower is lost in three ways. In city
driving on level roads about a third of the wheelpower is used to
accelerate the car, and hence ends up heating the brakes when the car
stops. Another third (rising to 60-70 percent at highway speeds) heats the
air the car pushes aside. The last third heats the tires and the road.

The key to a superefficient car is to cut all three losses by making the
car very light and aerodynamically slippery, and then recovering most of
its braking energy. Such a design could:

cut weight (hence the force required for acceleration) by 65-75 percent
through the use of advanced materials, chiefly synthetic composites, while
improving safety through greater strength and sophisticated design

cut aerodynamic drag by 60-80 percent through sleeker streamlining and
more
compact packaging

cut tire and road energy loss by 65-80 percent through the combination
of better tires and lighter weight.

Once this "ultralight strategy" has largely eliminated the losses of
energy that can't be recovered, the only other place the wheelpower can go
is into braking. And if the wheels are driven by special electric motors
that can also operate as electronic brakes, they can convert unwanted
motion back into useful electricity.

However, a hypercar isn't an ordinary electric car, running on batteries
that are recharged by being plugged into utility power. Despite impressive
recent progress, such cars still can't carry very much or go very far
without needing heavy batteries that suffer from relatively high cost and
short life. Since gasoline and other liquid fuels store a hundred times as
much useful energy per pound as batteries do, a long driving range is best
achieved by carrying energy in the form of fuel, not batteries, and then
burning that fuel as needed in a tiny onboard engine to make the
electricity to run the wheel motors. A few batteries (or, soon, a
carbon-fiber "superflywheel") can temporarily store the braking energy
recovered from those wheel motors and reuse at least 70 percent of it for
hill climbing and acceleration. With its power so augmented, the engine
needs to handle only the average load, not the peak load, so it can shrink
to about a tenth the current normal size. It will run at or very near its
optimal point, doubling efficiency, and turn off whenever it's not
needed.

This arrangement is called a "hybrid-electric drive," because it uses
electric wheel motors but makes the electricity onboard from fuel. Such a
propulsion system weighs only about a fourth as much as that of a
battery-electric car, which must haul a half ton of batteries down to the
store to buy a six-pack. Hybrids thus offer the advantages of electric
propulsion without the disadvantages of batteries.

ONE PLUS TWO EQUALS TEN

Auto makers and independent designers have already built experimental cars
that are ultralight or hybrid-electric but seldom both. Yet combining
these approaches yields extraordinary, and until recently
little-appreciated, synergies. Adding hybrid
electric drive to an ordinary car increases its efficiency by about a
third to a half. Making an ordinary car ultralight but not hybrid
approximately doubles its efficiency. Doing both can boost a car's
efficiency by about tenfold.

This surprise has two main causes. First, as already explained, the
ultralight loses very little energy irrecoverably to air and road
friction, and the hybrid-electric drive recovers most of the rest from the
braking energy. Second, saved weight compounds. When you make a heavy car
one pound lighter, you in effect make it about a pound and a half lighter,
because it needs a lighter structure and suspension, a smaller engine,
less fuel, and so forth to haul that weight around. But in an ultralight,
saving a pound may save more like five pounds, partly because power
steering, power brakes, engine cooling, and many other normal systems
become unnecessary. The design becomes radically simpler. Indirect weight
savings snowball faster in ultralights than in heavy cars, faster in
hybrids than in nonhybrids, and fastest of all in optimized combinations
of the two.

All the ingredients needed to capture these synergies are known and
available. As far back as 1921 German auto makers demonstrated cars that
were about twice as slippery aerodynamically as today's cars are. Most of
the drag reduction can come from such simple means as making the car's
underside as smooth as its top. Today's best experimental family cars are
25 percent more slippery still. At the same time, ultrastrong new
materials make the car's shell lighter. A lighter car needs a smaller
engine, and stronger walls can be thin; both changes can make the car
bigger inside but smaller outside. The smaller frontal area combines with
the sleeker profile to cut through the air with about one third the
resistance of today's cars. Advanced aerodynamic techniques may be able to
double this saving.

Modern radial tires, too, waste only half as much energy as 1970s bias-ply
models, and the best 1990 radials roughly halve the remaining loss.
"Rolling resistance" drops further in proportion to weight. The result is
a 65-80 percent decrease in losses to rolling resistance, which heats the
tires and the road.

Suitable small gasoline engines, of the size found in outboard motors and
scooters, can already be more than 30 percent efficient, diesels 40-50
percent (56 percent in lab experiments). Emerging technologies also look
promising, including miniature gas turbines and fuel cells--solid-state,
no-moving-parts devices that silently and very efficiently turn fuel into
electricity, carbon dioxide, water, and a greatly reduced amount of waste
heat.

In today's cars, accessories--power steering, heating, air conditioning,
ventilation, lights, and entertainment systems--use about a tenth of the
engine's power. But a hypercar would use scarcely more energy than that
for all purposes, by saving most of the wheelpower and most of the
accessory loads. Ultralights not only handle more nimbly, even without
power steering, but also get all-wheel anti-lock braking and anti-slip
traction from their special wheel motors. New kinds of headlights and
taillights shine brighter on a third the energy, and can save even more
weight by using fiber optics to distribute a single pea-sized lamp's light
throughout the car. Air conditioning would need perhaps a tenth the energy
used by today's car air conditioners, which are big enough for an Atlanta
house. Special paints, vented double-skinned roofs, visually clear but
heat-reflecting windows, solar-powered vent fans, and so forth can exclude
unwanted heat; innovative cooling systems, run not directly by the engine
but by its otherwise wasted by-product heat, can handle the rest.

Perhaps the most striking and important savings would come in weight. In
the mid-1980s many auto makers demonstrated "concept cars" that would carry four
or five passengers but weighed as little as 1,000 pounds (as compared with
today's average of about 3,200). Conventionally powered by internal
combustion, they were two to four times as efficient as today's average
new car. Those cars, however, used mainly light metals like aluminum and
magnesium, and lightweight plastics. The same thing can be done better
today with composites made by embedding glass, carbon, polyaramid, and
other ultrastrong fibers in special moldable plastics--much as wood embeds
cellulose fibers in lignin.

In Switzerland, where more than 2,000 lightweight battery-electric cars (a
third of the world's total) are already on the road, the latest roomy
two-seaters weigh as little as 575 pounds without their batteries.
Equivalent four-seaters would weigh less than 650 pounds, or less than 850
including a whole hybrid propulsion system. Yet crash tests prove that
such an ultralight can be at least as safe as today's heavy steel cars,
even if it collides head-on with a steel car at high speed. That's because
the composites are extraordinarily strong and bouncy, and can absorb far
more energy per pound than metal can. Materials and design are much more
important to safety than mere mass, and the special structures needed to
protect people don't weigh much. (For example, about ten pounds of hollow,
crushable carbon-fiber-and-plastic cones can absorb all the crash energy
of a 1,200-pound car hitting a wall at 50 mph.) Millions have watched on
TV as Indianapolis 500 race cars crashed into walls at speeds around 230
mph: parts of the cars buckled or broke away in a controlled,
energy-absorbing fashion, but despite per-pound crash energies many times
those of highway collisions, the cars' structure and the drivers'
protective devices prevented serious injury. Those were carbon-fiber
cars.

In 1991, fifty General Motors experts built an encouraging example of
ultralight composite construction, the sleek and sporty four-seat,
four-airbag Ultralite, which packs the interior space of a Chevrolet
Corsica into the exterior size of a Mazda Miata. The Ultralite should be
both safer and far cleaner than today's cars. Although it has only a
111-horsepower engine, smaller than a Honda Civic's, its light weight
(1,400 pounds) and low air drag, both less than half of normal, give it a
top speed of 135 mph and a 0-to-60 acceleration of 7.8 seconds--comparable
to a BMW 750iL with a huge V-12 engine. But the Ultralite is more than
four times as efficient as the BMW, averaging 62 mpg--twice today's norm.
At 50 mph it cruises at 100 mpg on only 4.3 horsepower, a mere fifth of
the wheelpower normally needed.

If equipped with hybrid drive, this 1991 prototype, built in only a
hundred days, would be three to six times as efficient as today's cars.
Analysts at Rocky Mountain Institute have simulated 300-400-mpg
four-seaters with widely available technology, and cars getting more than
600 mpg with the best ideas now in the lab. Last November a four-seater,
1,500-pound Swiss prototype was reported to achieve 90 mpg cruising on the
highway; at urban speeds, powered by its 573 pounds of batteries, it got
the equivalent of 235 mpg.

Similar possibilities apply to larger vehicles, from pickup trucks to
eighteen
wheelers. A small Florida firm has tested composite delivery vans that
weigh less loaded than normal steel vans weigh empty, and has designed a
halved-weight bus. Other firms are experimenting with streamlined
composite designs for big trucks. All these achieve roughly twice normal
efficiency with conventional drivelines, and could redouble that with
hybrids.

Hypercars are also favorable to--though they don't require--ultraclean
alternative fuels. Even a small, light, cheap fuel tank could store enough
compressed natural gas or hydrogen for long-range driving, and the high
cost of hydrogen would become unimportant if only a tenth as much of it
were needed as would be to power cars like today's. Liquid fuels converted
from sustainable farm and forestry wastes, too, would be ample to run such
efficient vehicles without needing special crops or fossil hydrocarbons.
Alternatively, solar cells on a hypercar's body could recharge its onboard
energy storage about enough to power a standard southern-California
commuting cycle without turning on the engine.

Even if a hypercar used conventional fuel and no solar boost, its tailpipe
could emit less pollution than would the power plants needed to recharge a
battery-electric car. Being therefore cleaner, even in the Los Angeles air
shed, than so-called zero-emission vehicles (actually "elsewhere-emission," mainly from dirty
coal-fired power plants out in the desert), ultralight hybrids should
qualify as ZEVs, and probably will. Last May the California Air Resources
Board reaffirmed its controversial 1990 requirement--which some
northeastern states want to adopt as well--that two percent of new-car
sales in 1998, rising to 10 percent in 2003, be ZEVs. Previously this was
deemed to mean battery-powered electric cars exclusively. But, mindful of
hypercars' promise, the CARB staff is considering broadening the ZEV
definition to include anything cleaner. This alternative compliance path
could be a big boost both for hypercar entrepreneurs and for clean air:
each car will be cleaner, and far more hypercars than battery cars are
likely to be bought. By providing a large payload, unlimited range, and
high performance even at low temperatures, hypercars vault beyond battery
cars' niche-market limitations.

This result brings full circle the irony of California's ZEV mandate.
Originally it drew howls of anguish from auto makers worried that people
would not buy enough of the costlier, limited-range cars it obliges them
to sell. The business press ridiculed California for trying to prescribe
an impractical direction of technological development. Yet that visionary
mandate is creating the solution to the problems. Like the aerospace,
microchip, and computer industries, hypercars will be the offspring of a
technology-forcing government effort to steer the immense power of Yankee
ingenuity. For it is precisely the California ZEV mandate that radically
advanced electric-propulsion technology--thereby setting the stage for the
happy combination with ultralight construction which we call the
hypercar.

BEYOND THE IRON AGE

The moldable synthetic materials in the GM and Swiss prototypes have
fundamental advantages over the metals that now dominate auto making. The
modern steel car, which costs less per pound than a McDonald's
quarter-pound hamburger, skillfully satisfies often conflicting demands
(to be efficient yet safe, powerful yet clean): steel is ubiquitous and
familiar, and its fabrication is exquisitely evolved. Yet this standard
material could be quickly displaced--as has happened before. In the 1920s
the wooden framing of U.S. car bodies was rapidly displaced by steel.
Today composites dominate boatbuilding and are rapidly taking over
aerospace construction. Logically, cars are next.

Driving this transition are the huge capital costs of designing, tooling,
manufacturing, and finishing steel cars. For a new model, a thousand
engineers spend a year designing and a year making half a billion dollars'
worth of car-sized steel dies, the costs of which can take many years to
be recovered. This inflexible tooling in turn demands huge production
runs, maroons company-busting investments if products flop, and magnifies
financial risks by making product cycles go further into the future than
markets can be forecast. That this process works is an astonishing
accomplishment, but it's technically baroque and economically perilous.

Moldable composites must be designed in utterly different shapes. But
their fibers can be aligned to resist stress and interwoven to distribute
it, much as a cabinetmaker works with the grain of wood. Carbon fiber can
achieve the same strength as steel at half to a third of the weight, and
for many uses other fibers, such as glass and polyaramid, are as good as
or better than steel and 50-85 percent cheaper. But composites' biggest
advantages emerge in manufacturing.

Only 15 percent of the cost of a typical steel car part is for the steel;
the other 85 percent pays for pounding, welding, and smoothing it. But
composites and other molded synthetics emerge from the mold already in
virtually the required shape and finish. And large, complex units can be
molded in one piece, cutting the parts count to about one percent of what
is now normal, and the assembly labor and space to roughly 10 percent. The
lightweight, easy-to-handle parts fit together precisely. Painting--the
hardest, most polluting, and costliest step in auto making, accounting for
nearly half the cost of painted steel body parts--can be eliminated by
laid-in-the-mold color. Unless recycled, composites last virtually forever: they don't
dent, rust, or chip. They also permit advantageous car design, including
frameless monocoque bodies (like an egg, the body is the structure), whose
extreme stiffness improves handling and safety.

Composites are formed to the desired shape not by multiple strikes with
tool-steel stamping dies but in single molding dies made of coated epoxy.
These dies wear out much faster than tool-steel dies, but they're so cheap
that their lack of durability doesn't matter. Total tooling cost per model
is about half to a tenth that of steel, because far fewer parts are
needed; because only one die set per part is needed, rather than three to
seven for successive hits; and because the die materials and fabrication
are much cheaper. Stereolithography--a three-dimensional process that
molds the designer's computer images directly into complex solid objects
overnight--can dramatically shrink tooling time. Indeed, the shorter life
of epoxy tools is a fundamental strategic advantage, because it permits
the rapid model changes and continuous improvement that product
differentiation and market nimbleness demand--a strategy of small design
teams, small production runs, a time to market of only weeks or months,
rapid experimentation, maximum flexibility, and minimum financial risk.

Together these advantages cancel or overturn the apparent cost
disadvantage of the composites. Carbon fiber recently cost around forty
times as much per pound as sheet steel, though increased production is
leading manufacturers to quote carbon prices half to a quarter of that.
Yet the cost of a mass-produced composite car is probably comparable to or
less than that of a steel car, at both low production volumes (like
Porsche's) and high ones (like Ford's). What matters is not cost per pound
but cost per car: costlier fiber is offset by cheaper, more agile
manufacturing.

SHIFTING GEARS IN COMPETITIVE STRATEGY

Ultralight hybrids are not just another kind of car. They will probably be
made and sold in completely new ways. In industrial and market structure
they will be as different from today's cars as computers are from
typewriters, fax machines from telexes, and satellite pagers from the Pony
Express.

Many people and firms in several countries are starting to realize what
hypercars mean; at least a dozen capable entities, including auto makers,
want to sell them. This implies rapid change on an unprecedented scale. If
ignored or treated as a threat rather than grasped as an opportunity, the
hypercar revolution could cost the United States millions of jobs and
thousands of companies. Auto making and associated businesses employ one
seventh of U.S. workers (and close to two fifths of workers in some
European countries). Cars represent a tenth of America's consumer
spending, and use nearly 70 percent of the nation's lead, about 60 percent
of its rubber, carpeting, and malleable iron, 40 percent of its machine
tools, 15 percent of its aluminum, glass, and semiconductors, and 13
percent of its steel. David Morris, a cofounder of the Institute for Local
Self-Reliance, observes, "The production of automobiles is the world's
number-one industry. The number-two industry supplies their fuel. Six of
America's ten largest industrial corporations are either oil or auto
companies. . . . A recent British estimate concludes that half of the
world's earnings may be auto- or truck-related." Whether the prospect of
hypercars is terrifying or exhilarating thus depends on how well we grasp
and exploit their implications.

The distribution of hypercars could be as revolutionary as their
manufacture. On average, today's cars are marked up about 50 percent from
production costs (which include profit, plant costs, and warrantied
repairs). But cheap tooling might greatly reduce the optimal production
scale for hypercars. Cars could be ordered directly from the local
factory, made to order, and delivered to one's door in a day or two.
(Toyota now takes only a few days longer than that with its steel cars in
Japan.) Being radically simplified and ultra-reliable, they could be
maintained by technicians who come to one's home or office (Ford does this
in Britain today), aided by plug-into-the-phone remote diagnostics. If all
this makes sense for a $1,500 mail-order personal computer, why not for a
$15,000 car?

Such just-in-time manufacturing would eliminate inventory, its carrying
and selling costs, and the discounts and rebates needed to move existing
stock that is mismatched to demand. The present markup could largely
vanish, so that hypercars would be profitably deliverable at or below
today's prices even if they cost considerably more to make, which they
probably wouldn't.

America leads--for now--both in start-up-business dynamism and in all the
required technical capabilities. After all, hypercars are much more like
computers with wheels than they are like cars with chips: they are more a
software than a hardware problem, and competition will favor the
innovative, not the big. Comparative advantage lies not with the most
efficient steel-stampers but with the fastest
learning systems integrators--with innovative manufacturers like
Hewlett-Packard and Compaq, and strategic-element makers like Microsoft
and Intel, more than with Chrysler or Matsushita. But even big and able
firms may be in for a rough ride: the barriers to market entry (and exit)
should be far lower for hypercars than for steel cars. Much as in existing
high-tech industries, the winners might be some smart, hungry, unknown
aerospace engineers tinkering in a garage right now--founders of the next
Apple or Xerox.

All this is alien to the thinking of most (though not all) auto makers
today. Theirs is not a composite-molding/electronics/software culture but
a diemaking/steel-stamping/mechanical culture. Their fealty is to heavy metal, not light
synthetics; to mass, not information. Their organizations are dedicated,
extremely capable, and often socially aware, but have become prisoners of
past expenditures. They treat those historical investments as unamortized
assets, substituting accounting for economic principles and throwing good
money after bad. They have tens of billions of dollars, and untold
psychological investments, committed to stamping steel. They know steel,
think steel, and have a presumption in favor of steel. They design cars as
abstract art and then figure out the least unsatisfactory way to make
them, rather than seeking the best ways to manufacture with strategically
advantageous materials and then designing cars to exploit those
manufacturing methods.

The wreckage of the mainframe-computer industry should have taught us that
one has to replace one's own products with better new products before
someone else does. Until recently few auto makers appreciated the
starkness of the threat. Their strategy seemed to be to milk old tools and
skills for decades, watch costs creep up and market share down, postpone
any basic innovation until after all the executives' planned retirement
dates--and hope that none of their competitors was faster. That's a
bet-the-company strategy, because even one superior competitor can put a
company out of business, and the company may not even know who the
competitor is until too late. The PNGV is stimulating instead a winning,
risk-managed strategy: leapfrogging to ultralight hybrids.

It is encouraging that some auto makers now show signs of understanding
the problem. In recent months the PNGV has sparked new thinking in
Detroit. The industry's more imaginative engineers are discovering that
the next gains in car efficiency should be easier than the last ones were,
because they will come not from sweating off fat ounce by ounce but from
escaping an evolutionary trap. Although good ultralight hybrids need
elegantly simple engineering, which is difficult, one can more easily
boost efficiency tenfold with hypercars than threefold with today's
cars.

Little of this ferment is visible from the outside, because auto makers
have learned reticence the hard way. A long and unhappy history of being
required to do (or exceed) whatever they admit they can do has left them
understandably bashful about revealing capabilities, especially to
Congress. And firms with innovative ambitions will hardly be eager to
telegraph them to competitors. Corporations share a natural desire to
extract any possible business and political concessions, and to hold back
from extending to traditional adversaries (such as the media, politicians,
and environmentalists) any trust that could prove costly if abused or not
reciprocated. Thus automakers are more likely to understate than to
trumpet progress. Also, the Big Three are progressing unevenly, both
internally and comparatively: their opacity conceals a rapidly changing
mixture of exciting advances and inertia. Only some executives appreciate
that hypercars fit the compelling strategic logic in favor of changing how
their companies do business, especially by radically reducing cycle times,
capital costs, and financial risks. It is difficult but vital for harried
managers to focus on these goals through the distracting fog of fixing
flaws in their short-term operations. But signs of rapid cultural change
are looming, such as General Motors' announcement, last February 3, that
its corporate policy now includes the CERES (Coalition for Environmentally
Responsible Economies) Principles, formerly known as the Valdez
Principles--a touchstone of environmentalists.

THE COST OF INACTION

The potential public benefits of hypercars are enormous--in oil
displacement, energy security, international stability, forgone military
costs, balance of trade, climatic protection, clean air, health and
safety, noise reduction, and quality of urban life. Promptly and
skillfully exploited, hypercars could also propel an industrial renewal.
They're good news for industries (many of them now demilitarizing) such as
electronics, systems integration, aerospace, software, petrochemicals, and
even textiles (which offer automated fiber-weaving techniques). The talent
needed to guide the transition is abundant in American labor, management,
government, and think tanks, but it's not yet mobilized. The costs of that
complacency may be high.

Cars and light trucks use about 37 percent of the nation's oil, about half
of which is imported at a cost of around $50 billion a year. We Americans
recently put our sons and daughters in 0.56 mpg tanks and
17-feet-per-gallon aircraft carriers because we hadn't put them in 32 mpg
cars--sufficient, even if we'd done nothing else, to have eliminated the
need for American oil imports from the Persian Gulf. Of course, more than
just oil was at stake in the Gulf War, but we would not have sent half a
million troops there if Kuwait simply grew broccoli. Even in peacetime the
direct cost to the nation of Persian Gulf oil--mostly paid not at the pump
but in taxes for some $50 billion a year in military readiness to
intervene in the Gulf--totals nearly $100 a barrel of crude, making it
surely the costliest oil in the world.

Had we simply kept on saving oil as effectively after 1985 as we had saved
it for the previous nine years, we wouldn't have needed a drop of oil from
the Persian Gulf since then. But we didn't--and it cost us $23 billion for
extra imports in 1993 alone. Gulf imports were cut by about 90 percent
from 1977 to 1985 (chiefly by federal standards that largely or wholly
caused new-car efficiency to double from 1973 to 1986). Yet they are now
reapproaching a historic high--the direct result of twelve years of a
national oil policy consisting mainly of weakened efficiency standards,
lavish subsidies, and the Seventh Fleet.

The national stakes therefore remain large. And even though the PNGV is
starting to re-create Detroit's sense of adventure, hypercars still face
formidable obstacles, both culturally within the auto industry and
institutionally in the marketplace. Whether or not their advantages make
their ultimate adoption certain, the transition could be either
unnecessarily disruptive, shattering industrial regions and job markets,
or unnecessarily slow and erratic in capturing the strategic benefits of
saving oil and rejuvenating the economy. Auto makers should be given
strong incentives to pursue the leapfrog strategy boldly, and customers
should be encouraged to overcome their well-known lack of interest in
buying fuel-thrifty cars in a nation that insists on gasoline cheaper than
bottled water.

MARKET CONDITIONING AND PUBLIC POLICY

The usual prescription of economists, environmentalists, and the Big Three-
though, it seems, a politically suicidal one--is stiff gasoline taxes.
After painful debate Congress recently raised the gasoline tax by 4.3
cents a gallon, leaving the price, corrected for inflation, the lowest
both in the industrial world and in U.S. history. But in Western Europe
and Japan taxes that raise the price of motor fuel to two or four times
that in the United States have long been in place, with unspectacular
results. Gasoline costing two to five dollars a gallon has modestly
reduced distances driven but has had less of an effect on the efficiency
of new cars bought. New German and Japanese cars are probably less
efficient than American ones, especially when performance, size, and
features are taken into account. Costlier fuel is a feeble incentive to
buy an efficient car, because the fuel-price signal is diluted (in the
United States today, by seven to one) by the other costs of owning and
running a car. It is, as well, weakened by high consumer discount rates
over a brief expected ownership, and often vitiated by company-owned cars
and other distortions that shield many drivers from their cars' costs.

This market failure could be corrected by strengthening government
efficiency standards. But standards, though effective and a valuable
backstop, are not easy to administer, can be evaded, and are
technologically static: they offer no incentive to keep doing better.
Happily, at least one market-oriented alternative is available: the
"feebate."

Under the feebate system, when you buy a new car, you pay a fee or get a
rebate. Which and how big depends on how efficient your new car is. Year
by year the fees pay for the rebates. (This is not a new tax. In 1990 the
California legislature agreed, approving a "Drive+" feebate bill by a
seven-to-one margin, although outgoing Governor George Deukmejian vetoed
it.) Better still, the rebate for an efficient new car could be based on
how much more efficient it is than an old car that's scrapped (not traded
in). A rebate of several thousand dollars for each 0.01-gallon-per-mile
difference would pay about $5,000 to $15,000 of the cost of an efficient
new car. That would rapidly get efficient, clean cars on the road and
inefficient, dirty cars off the road (a fifth of the car fleet produces
perhaps three fifths of its air pollution). The many variants of such
"accelerated-scrappage" incentives would encourage competition, reward
Detroit for bringing efficient cars to market, and open a market niche in
which to sell them. Feebates might even break the political logjam that
has long trapped the United States in a sterile debate over higher
gasoline taxes versus stricter fuel-efficiency standards--as though those
were the only policy options and small, slow, incremental improvements
were the only possible technical ones.

Perhaps people would buy hypercars, just as they switched from vinyl
records to compact discs, simply because they're a superior product: cars
that could make today's most sophisticated steel cars seem clunky and
antiquarian by comparison. If that occurred, gasoline prices would become
uninteresting. Scholastic debates about how many price elasticities can
dance on the head of a pin would die away. The world oil price would
permanently crash as superefficient vehicles saved as much oil as OPEC now
extracts. Feebates would remain helpful in emboldening and rewarding
Detroit for quick adaptation, but perhaps would not be essential. The
ultralight hybrid would sweep the market. What then?

Then we would discover that hypercars cannot solve the problem of too many
people driving too many miles in too many cars; indeed, they could
intensify it, by making driving even more attractive, cheaper, and nearly
free per extra mile driven. Having clean, roomy, safe, recyclable,
renewably fueled 300 mpg cars doesn't mean that eight million New Yorkers
or a billion still-carless Chinese can drive them. Drivers would no longer
run out of oil or air but would surely run out of roads, time, and
patience. Avoiding the constraint du jour requires not only having great
cars but also being able to leave them at home most of the time. This in
turn requires real competition among all modes of access, including those
that displace physical mobility, such as telecommunications. The best of
them is already being where we want to be--achievable only through
sensible land use.

Such competition requires a level playing field with honest pricing, so
that drivers (and everyone else) will both get what they pay for and pay
for what they get. But least-cost choices are inhibited today by central
planning and socialized financing of car-based infrastructure, such as
roads and parking, while alternative modes must largely pay their own way.
Happily, emerging policy instruments could foster and monetize fair
competition among all modes of access. Some could even make markets in
"negamiles" and "negatrips," wherein we could discover what it's worth
paying people to stay off the roads so that we needn't build and mend them
so much and suffer delays and pollution. Congestion pricing, zoning
reforms, parking feebates, pay-at-the-pump car insurance,
commuting-efficient mortgages, and a host of other innovations beckon
state, local, and corporate experimenters. Yet unless basic and
comprehensive transport and land-use reforms emerge in parallel with
hypercars, cars may become apparently benign before we've gotten good
enough at not needing to drive them--and may thus derail the reformers.

If the technical and market logic sketched here is anywhere near right, we
are all about to embark on one of the greatest adventures in industrial
history. Whether we will also have the wisdom to build a society worth
driving in--one built around people, not cars--remains a greater
challenge. As T. S. Eliot warned, "A thousand policemen directing the
traffic / Cannot tell you why you come or where you go."